Experts from the national, state and local levels came together at the Merrell Center for a half-day meeting on June 28 to present economic updates as well as forecasts for the Katy and Houston area. The economic summit, jointly hosted at 6301 S. Stadium Lane in Katy by the Katy Area Chamber of Commerce and the Katy Economic Development Council, was moderated by Mike Schofield, State Representative for District 132, whose district covers much of the Katy area.

Following opening remarks from KAEDC President and CEO Angie Thomason, the first speaker was Aaron Demerson, who serves as the president and CEO of the Texas Economic Development Corporation (TxEDC), an independently-funded and operated 501 (c) 3 organization that strategically partners and markets the state of Texas both domestically and internationally as a premier business destination for companies seeking to locate, relocate or expand the footprint of their existing businesses. He described “the great business migration,” citing Texas as the eighth largest economy in the world and stating that “Texas is the future of America.” Demerson said that upcoming international efforts to market the state would include trips to the United Kingdom, India and Asia. Energy is still number one, he said, adding that the state needs sustainable energy storage. Looking to the future, Demerson said that business leaders need to be proactive in addressing artificial intelligence and taking advantage of it.

A panel moderated by Thanh Le, currently the chair of the Vietnamese Culture and Science Association and also managing director of Growth ID Solutions, provided an update on commercial real estate and the restaurant sector of the Katy area, with a focus on Katy Asian Town. Thomas Nguyen, Restaurant Practice Leader at CBRE, said that Katy is one of the first areas considered by national brands who want to expand into the Houston area. He described Katy Asian Town as being in three sectors: the northern part closest to HMart, which is similar to the Bellaire Blvd. area in that it has a lot of “mom and pop” operations. The middle section of Katy Asian Town is operated by NewQuest Properties and is attracting “best in class” restaurants such as Tim Ho Wan’s first dim sum restaurant In Texas, and this portion will soon be adding about 150,000 square feet of commercial space. The third section of the complex is the “entertainment” portion, where attractions such as Tiger Woods’ Popstroke, Home Run Dugout, Andretti’s Karting, and other venues are located; Nguyen said that Electric Pickle would soon be opening a pickleball facility here, followed by a new location for Pitch 25.

Panelist Stephen Le Jr., president of Greatland Investments, Inc., noted that Asia is the fastest growing market in the world. He said that Katy Asia Town was able to attract new tenants even with lease rates of $40.00 to $50.00 per square foot, up from the $30.00 range when the center first opened. Nguyen said that Katy was under consideration – potentially in the top five cities -- by American Ninja Warrior Amusement Park for a Texas location. Stephen Le said that half of the visitors and customers of Katy Asian Town are non-Asian, and are people who enjoy good food and are knowledgeable about it. Nguyen predicted that “a lot of restaurants will close” and that development has slowed in the last 12 months, due to interest rates. “It’s exciting but scary,” he
said. Stephen Le said that even though restaurants may fail, there is another person waiting to fill that spot, and that demand is not slowing down anytime soon.

The national and regional perspective was provided by Jesse Thompson, senior business economist at the Houston Branch of the Federal Reserve Bank of Dallas. Thompson studies issues affecting the Houston and Gulf Coast economy -- in particular, those issues affecting hydrocarbon industries. He said that the regional outlook showed that the Texas and Houston economy had stabilized near more sustainable and healthy levels and that job growth -- which he called the best measure of economic growth -- remained flat at the local level, having slowed to two percent last year and staying there. Normal growth post pandemic is about 1.7 percent and that “above trend growth“ would continue in the region. Unemployment was ticking up slightly, he said, but noted that it was still a tight labor market and that it was still hard to find the right person for some jobs, but not as hard as a year ago. The Fed mandates full employment, “and by any definition we are there,” he said. “Oil and gas is on cruise control,” Thompson said, with the industry showing moderate growth this year and next, but it would not be the thing that drives the Houston economy up in the near term. Residential real estate remains mixed, he said, with commercial real estate and multi-family sectors remaining challenged.

The “trimmed mean inflation rate” nationally has slowed down to three per cent but has picked up the last three months, Thompson said. Inflation still has aways to go before it gets down to the Fed’s target date, he said. The GDP growth in the first quarter of 2024 was slower than estimated but that a modest increase of 1.9 percent is anticipated in 2025. Thompson also said that unemployment will be about 4.1 percent in 2025. The national economy and job growth will be strengthened by a surge in immigration; the vast majority of newcomers are legally able to work and will be demanding housing, goods and services. Thompson said that Texas job growth had slowed to 2.8 percent and the Houston area was at 2.2 percent but both areas outperformed the U.S. in a majority of sectors. Job losses in oil and gas and layoffs in the high-tech industries located in Austin drove down the state numbers. The price of WTI crude remains – and is expected to remain -- in the $70.00-$80.00 per barrel range, above the “break even” price this year and next. “The regional outlook is on autopilot this year and next,” he said. Energy construction will increase as natural gas exports increase, he said. “We are still building LNG plants,” he said but that the market would see some slack by 2030.

Regarding real estate and construction, Thompson said that residential real estate was coming into balance in Houston, with prices leveling off and home supply remaining tight. Incentives are driving sales, with inventory of existing homes at about a four-month supply and a leveling off of home prices. The multi-family real estate market has overbuilt and people are moving out of apartments into single-family and “build to rent” housing. Rents are likely to come down, along with a drop in multi-family permits. Houston’s multi-family market is not as soft as the rest of Texas. Warehousing will remain strong. Office space has a 24 percent vacancy rate, but that the utilization of space being leased is low, with many companies looking to downsize their space or to relocate to the suburbs where employees may find shorter commutes and area amenities such as restaurants attractive – which would provide incentives for workers to come to the office.

Texas real sales tax revenue, when adjusted for inflation, points to stabilizing consumer demand, he said. “Texas consumers are still operating at a high level,” he added. In Houston, job growth would

be “treading water” with modest growth over the next six months. Geopolitics – events in Israel, Russia and Ukraine – are unlikely to affect the local area, he said. Tariffs in general, as an economic principal, tend to cause some problems in industries dependent on exports, such as those like the petrochemical companies in Houston, Thompson said, and that this would ultimately cause prices to rise for consumers.

A panel on sustainable energy, moderated by KAEDC board member and President of EMA Solutions Rick Lawler, included Bobby Hunt, general manager at Total Hydrogen Solutions; Jonathan Parella, CEO of TerraFlow Energy which specializes in flow battery technology and battery optimization software; Telicia Anderson, finance and accounting director for LiN; John Li, CEO of United Standard Materials Corporation; Alex Rohr, community affairs manager for Vesper Energy whose Ochoa Energy Storage recently held an open house for its Katy location; and Howard Lee, a partner in Preedom Power Development Partners. Lawler said that Hunt’s company is at the forefront of bringing the hydrogen industry to the Katy area.

The keynote speaker during the luncheon portion of the meeting was Lt. Colonel Bob Darling, who retired from the U.S. Marine Corps with over twenty years of active-duty service. Darling, now the CEO of Quantitative Analytics, LLC, became a presidential pilot with Marine Helicopter Squadron One. In October 2000, he was selected to work for the White House Military Office, Airlift Operations Department and in that capacity, he supported the President, Vice President and National Security Advisor in the Presidential Emergency Operations Center (PEOC) on September 11, 2001.